New Report Details Benefits of Aviation Safety Agreements

ALEXANDRIA, VIRGINIA – Bilateral Aviation Safety Agreements (BASA) dramatically reduce regulatory compliance costs for the aviation maintenance industry and make repair stations more profitable, a new report from the Aeronautical Repair Station Association (ARSA) has found.

BASAs are government-to-government arrangements that allow cooperation between aviation safety regulators in areas including design, production, flight operations, environmental certification, and maintenance. BASAs allow the “domestic” aviation authority to perform audits and make findings on behalf of the “foreign” authority, thereby avoiding regulatory duplication and government waste. While the United States has concluded more than 30 BASAs, maintenance sub-agreements exist only with Canada and the European Union (EU). The EU BASA, which took effect on May 1, superseded prior maintenance arrangements with France, Ireland, and Germany.

The new study conducted for ARSA by AeroStrategy, an international aviation consultancy, examined the economic impact of existing maintenance BASAs on certificated repair stations. “The implementation of maintenance bilaterals and increased maintenance contracting by airlines has coincided with the safest period in the history of civil aviation,” ARSA Executive Director Sarah MacLeod said. “The new report proves that BASAs reduce costs for repair stations and make oversight more efficient.”

AeroStrategy found:

*It costs repair stations significantly more (almost three times as much) to become certificated by “foreign” civil aviation authorities (CAA) when the home country does not have a BASA. AeroStrategy determined that initial Federal Aviation Administration (FAA) certification for a repair station located in the United States on average costs a little over $15,000. Approval by the European Aviation Safety Agency (EASA) for U.S. facilities costs slightly less (around $11,500). EASA certification is less expensive because the EU’s BASA with the United States allows the FAA certificate to serve as the basis for EASA approval. By contrast, the cost for a repair station in the United States to become certificated by the Civil Aviation Administration of China (CAAC) is more than $30,000.

*BASAs help make repair stations more profitable. On average, FAA certification renewal costs consume two cents of every dollar of revenue generated by the FAA certificate, while EASA approval renewal consumes about four cents. By comparison, renewing a CAAC certificate consumes 16 cents of the average revenue dollar it generates. In addition, non-BASA certificates typically generate lower revenues (relative to FAA/EASA business). High certification costs therefore make the work more expensive – and less profitable – for the repair station.

*The collapse of the U.S.-EU BASA would disproportionately hurt small companies. Larger companies are better able to spread out (i.e., internally amortize) regulatory compliance costs. EASA certificate renewal consumes a greater portion of revenues for smaller companies (one to five employees) than large companies (200+). If the U.S.-EU BASA did not exist, compliance costs would increase for all U.S. repair stations, but small companies would be hit harder because the costs would consume a greater percentage of their revenues.

The report comes as House and Senate negotiators are working to craft an FAA reauthorization bill. As part of that process, lawmakers considered amendments that, if enacted, would lead to the collapse of the U.S.-EU BASA.

“The bottom line is that policies that threaten BASAs threaten U.S. jobs and the profitability of American companies,” ARSA Executive Vice President Christian A. Klein said. “Based on the AeroStrategy report, the U.S. government should aggressively work to conclude additional maintenance agreements to level the playing field and make it easier for U.S. companies to compete globally.”

The AeroStrategy report was based on a survey of repair stations conducted over a ten-week period from January to April 2011. Companies serving the United States, the European Union, China, Brazil, Japan, Thailand, Korea, Vietnam, Venezuela, Argentina, Singapore, Saudi Arabia, Indonesia and Caribbean nations participated. Survey results were provided directly to AeroStrategy; ARSA was not involved in analyzing the data.

Prior AeroStrategy studies determined that in the United States, the maintenance industry employs 274,000 workers, has a $39 billion impact on the U.S. economy, and a $2.4 billion positive balance of trade. The new report, Bilateral Aviation Safety Agreements: Reducing Costs for the Aviation Industry, is available at: http://www.arsa.org/files/ARSA-BASAs-ReducingCostsForTheAviationIndustry.pdf. ARSA will host a press teleconference for the media with AeroStrategy researchers at 11 a.m. ET on Thursday, June 16 to discuss the new report in more detail. Register at arsa.webex.com

ARSA is an Alexandria, Virginia-based trade association that represents aviation maintenance and manufacturing companies. Founded in 1984, the association has a distinguished record of advocating for repair stations, providing regulatory compliance assistance to the industry, and representing repair stations on Capitol Hill and in the media.